GrafTech International(EAF)2022-05-06 15:46Financial Data and Key Metrics Changes - Net income for Q1 2022 totaled $124 million, translating to $0.47 GAAP earnings per share and $0.48 adjusted earnings per share, reflecting strong financial performance [20] - Adjusted EBITDA for Q1 2022 was $170 million, an increase of $15 million year-over-year, resulting in an adjusted EBITDA margin of 46% [20] - Operating cash flow generated in Q1 2022 was $146 million, with adjusted free cash flow at $130 million, both representing a year-over-year increase of 20% [21] Business Line Data and Key Metrics Changes - The company sold 43,000 metric tons of electrodes in Q1 2022, a 16% increase compared to the prior year [15] - Average non-LTA pricing rose by 19% in Q1 2022 compared to Q4 2021, following a 10% sequential increase in the previous quarter [11] - Production reached 46,000 metric tons for the second consecutive quarter, marking a 28% year-over-year increase [15] Market Data and Key Metrics Changes - First quarter global steel production, excluding China, was essentially flat year-over-year, with healthy capacity utilization rates particularly in North America [10] - The demand for petroleum needle coke, a key raw material for graphite electrodes, is expected to expand due to its use in electric vehicle batteries [9] Company Strategy and Development Direction - The company is focused on leveraging its vertical integration into petroleum needle coke as a competitive advantage, which supports higher electrode pricing [9] - GrafTech aims to capitalize on the growing demand for electric arc furnace (EAF) steelmaking, which is more cost-effective and environmentally friendly [27] - The company is committed to a disciplined capital allocation strategy, including debt reduction and stock repurchases, while investing in operational improvements [24][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the ongoing trends in the graphite electrode market, driven by strong demand and pricing [8][26] - The company anticipates that the electric arc furnace segment will continue to grow, contributing to the decarbonization of the steel industry [27] - Management acknowledged inflationary pressures but indicated confidence in managing costs due to strong supplier relationships and vertical integration [21][22] Other Important Information - The company has provided force majeure notices for certain LTAs serving customers in Russia due to the conflict, resulting in a shift of contracted volumes to 2023-2024 [12] - GrafTech's balance sheet was strengthened with a $70 million reduction in term loans during Q1 2022, improving the debt-to-adjusted EBITDA ratio to 1.4 times [23] Q&A Session Summary Question: Current pricing environment for spot sales - Management refrained from providing guidance beyond Q2 but acknowledged the pricing environment as consistent with expectations [31] Question: Evidence of inventory builds globally - Management indicated it is too early to point to significant inventory builds globally, as the American market remains strong [32] Question: Update on expanding petroleum needle coke production for EV market - Management confirmed ongoing studies regarding potential expansion into the EV market but did not provide further details [33] Question: European market development and strategy changes - Management continues to monitor the situation in Europe but has not changed its strategy, focusing on regional strengths and pricing opportunities [37] Question: Demand uptake from the EV anode market - Management is evaluating opportunities in the EV market but did not provide specific statistics at this time [39] Question: Plans for deploying free cash flow - Management emphasized a disciplined capital allocation strategy, focusing on debt reduction and returning capital to shareholders [58] Question: Update on CEO succession planning - Management confirmed that a global search for a new CEO is underway [61]